Most businesses spend a lot of time and money trying to win new customers, and not very much on keeping the ones they already have. But that can be the wrong way around.
It’s generally accepted that it can cost up to five times more in marketing expense to acquire a new customer than it is to get an existing customer to buy from you again; not to mention being up to 50% less effort and resource to sell to existing customers than to brand new prospects.
Existing customers have already bought from you, so if they had a good experience they will probably buy from you again. Trust and confidence has already been established, and you already know something about them therefore it’s easier to identify their needs.
In addition, existing customers can give you valuable feedback on your performance. Was your customer service good enough? Did your product meet their expectations? Was it good value for money? You can use this feedback to continue to improve your product and service. Being authentic and honest is key for retaining these interested customers, of which you can read more about in our importance of networking blog here.
How much more depends on the type of business you operate, but industry-recognised research shows that reducing the loss of customers by just 5% can boost profits by anything from 25% to 75%. This is because selling to existing customers will be less focused on price as opposed to new customers, as you might not need as many discounts that you would usually use to attract new customers. And since your existing customers trust you, it may be possible to convince the customer to become interested in even more of your products or services through upselling and cross-selling.
It’s common to think that if you have a great product or service, then customer retention will naturally follow. And while this might be the case in some instances, the truth is that it’s a short-term strategy. That’s why it’s important to look after your existing customers.
One of the challenges in business is to create a competitive advantage that your competitors can’t copy. They can copy your products or your pricing - but the one thing they can’t copy is the experience your customers have when they do business with you. Sometimes, small changes have a big impact on how customers perceive the quality of your product or service and make the difference between loyalty and high churn rates.
The whole idea is to keep in contact with your existing customers, to build goodwill and positive word of mouth, and to prevent the chance of your customers being lured away by the competition.
So here’s a Business Builder checklist of actions you can adopt right now to keep your customers by keeping them happy.
Next, we are going to look at one of the key tools in managing client relationships effectively:
A Customer Relationship Management (CRM) system
Depending on the size of your business and customer database, a CRM system may offer you the best approach to take your customers’ experience to the next level.
We’re all customers, and customers always want to feel like individuals, not like targets. And while CRM software does not manage customer retention by itself, it will provide you with the tools to help you manage the activities around customer engagement.
CRM is about knowing your customers – who they are, how they’ve been marketed to and how they responded. If all goes well, you keep selling to them, and that’s when the fruitful relationship really starts.
With the help of CRM software, you can gather and manage information on your customers and also manage activities around customer engagement. By using the data that CRM software provides, it will make it easier to retain customers, keep them happy and grow profits – all without the added expense of acquiring new customers. Here’s how it can help:
Information gathered in CRM software can reveal which of your accounts are responsible for the most revenue. This information lets you budget your time accordingly and allocate resources where they will have the most return, such as rewarding your most profitable customers to further increase their loyalty. Identifying these accounts can also help you develop strategies for cross-selling, and by identifying your most profitable customers, you can start to follow up and let them know about the rewards and incentives in order to make them feel special, so they continue to stay as your most profitable customers.
The most obvious way to ensure customer retention is to prevent a customer from leaving. And if you pay attention, you can always see the signals of your customer's impending departure. All you have to do is to identify the key variables such as purchase patterns, product usage and service calls. Capture the signals and then put specific actions in place to stop your customers before they leave.
Let’s say you want to know how many of your VIP customers have not purchased anything in the last six months, which might be a sign of them considering your service or even taking their money to your competitors.
First, create a list of all of your VIP customers, and then create a list of all sales made within the last six months using your CRM software. By combining both of these lists, you end up with a list of VIP customers who haven’t purchased from you in more than half a year. You can now follow up with these VIP customers and find out the reasons why they were not purchasing and look to prevent them leaving your business, which, if you consider the 80/20 rule, this investment is bound to pay off.
The more you know about your customers, the more you can tailor your approach to each individual.
CRM software lets you view a customer’s purchase history so that you can determine what kind of offer will be most appealing to each individual and increase relevancy, which will keep your brand on your customers’ minds.
Let’s say you want to follow-up on the customers who showed their interest in your product, but haven’t bought anything from you. You can identify ways to convert their interest into an actual purchase by offering them special discounts or some additional value to your product.
Using your CRM software, you can create a list of all open sales activities and compare that with a list of all your contacts. The result is a list of contacts that are interested in your product but so far, have not initiated a sale.
The scheduling features in CRM software allow you to schedule follow-up calls or emails. By doing this, it will help you to keep track of your appointments, and complete any customer-focused tasks that you said you’d do when you said you’d do it.